1. What is Salary Sacrifice Pension?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for pension contributions from their employer. This can reduce income tax and National Insurance contributions.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• Gross Pay — Total salary before deductions
• Income Tax — Calculated based on UK tax bands
• National Insurance — UK National Insurance contributions
• Pension Sacrifice — Amount sacrificed for pension

Explanation: The calculation shows how much take-home pay remains after all deductions including the pension sacrifice amount.

3. Benefits of Salary Sacrifice

Details: Salary sacrifice can save tax and National Insurance for both employee and employer. The sacrificed amount isn't subject to income tax or National Insurance.

4. Using the Calculator

Tips: Enter your gross annual salary, estimated income tax, National Insurance contributions, and planned pension sacrifice amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is salary sacrifice pension right for me?
A: It depends on your circumstances. Generally beneficial for higher rate taxpayers, but may affect mortgage applications or other salary-based benefits.

Q2: What's the maximum I can sacrifice?
A: The annual allowance is £60,000 (2023/24), but this includes all pension contributions. Salary sacrifice can't reduce your pay below National Minimum Wage.

Q3: Does it affect employer NI contributions?
A: Yes, employers save 13.8% NI on sacrificed amounts, which some may add to your pension.

Q4: Are there any risks?
A: May affect state pension entitlement if NI contributions fall below qualifying levels. Some benefits like maternity pay may be affected.

Q5: Can I change my sacrifice amount?
A: Typically you can adjust during annual benefits reviews or after life events like marriage or childbirth.